Section 301 Tariffs got you down?

​Sec 301 Tariffs –
You are undoubtedly behind the eight-ball if you are just starting your mitigation efforts, but it’s never too late. 
So far there are three tranches of the Section 301 Tariffs and a rumored 4th.  The first two offered opportunities for companies to file a request for exclusion of their goods, and there will be a third exclusion process you can take advantage of.  By doing so, you’ve got nothing to lose.  Make your voice heard! Remember though, the number one reason exclusion requests fail is because the petitioner failed to show that the product under consideration could only be procured from China.  Specifically, the petitioner failed to show that the product couldn’t be made elsewhere.
The administration likely doesn’t care that you’re heavily invested in China.  Their unrealistic expectation that you would just stop doing business there was just that… unrealistic.  Business is like a huge cargo ship… It doesn’t stop and turn on a dime.
So now you’re left holding the bag… How are you going to mitigate these tariffs?  You could tool-up in another country and avoid them altogether, but many of your hardcore products likely require trained workers to assemble your products and training new workers takes time and investment.  You could wait it out, but the experts simply just don’t know when these tariffs will end.
So, what mitigation weapons remain at this point?

• HTS re-classification is likely your best strategy.  Keep in mind that at the end of the day you will have to articulate your decision to lawfully reclassify just in case Customs questions you.  Enter reasonable care!  Get an opinion from your lawyer, or your expert trade consultant prior to reclassifying your products.
• Third-country manufacturing is an option for some of your lesser involved products, however that too may involve retooling or moving technology; beware of import quotas.
• Raising prices is better than margin erosion, but many times price is what separates you from your competition. 
• Duty drawback – This could be a windfall if done correctly, but the cost of set up and maintenance costs may outstrip any savings.  Remember, they are not available for the sec. 232 Tariffs.
• Bonded Warehouse – not Free Trade Zones… FTZ’s were poisoned by the administration - If you import anything into a FTZ those goods must be imported with privileged foreign status. Thus, locking in the 301 or 232 tariffs at the time the goods were entered versus using a regular old bonded warehouse, you don’t pay any duties until you withdraw the goods.  If the 232 or 301 tariffs are rescinded at the time you withdraw, then you are safe.
• Post Entry Amendment – After you’ve completed your classification analysis and lawfully reclassified, was your item hit by the 301 duties?  You may be in line for a refund of duties.  While this move is rather bold, keep in mind reasonable care, which as mentioned above is your responsibility under the MOD act. 

There are many strategies a company can employ to mitigate their exposure to these tariffs.  The important part to remember is exercise reasonable care.
Maple Creek employs a forensic, hands-on, comprehensive approach to international trade development ultimately providing you the opportunity to anticipate legal issues before they become an issue. Global trade compliance is strategic, we help our clients assess areas of vulnerability, remove avoidable costs, minimize risk and foster international trade development.  See our blog on Reasonable Care and let us know how we can help.